FIRST UNITED CORPORATION ANNOUNCES FIRST QUARTER 2026 FINANCIAL RESULTS

OAKLAND, Md., April 20, 2026 /PRNewswire/ -- First United Corporation (the "Corporation, "we", "us", and "our") (NASDAQ:FUNC), a bank holding company and the parent company of First United Bank & Trust (the "Bank"), today announced financial results for the three-month period ended March 31, 2026.  Generally Accepted Accounting Principles ("GAAP") net income was $6.7 million for the first quarter of 2026, or $1.03 per diluted share, compared to $5.8 million, or $0.89 per diluted share, for the first quarter of 2025 and $5.8 million, or $0.89 per diluted share, for the fourth quarter of 2025.  Non-GAAP net income was $6.6 million, or $1.02 per diluted share, for the first quarter of 2026 compared to $5.8 million, or $0.89 per diluted share for the first quarter of 2025 and $7.2 million, or $1.10 per diluted share, for the fourth quarter of 2025.  Return on Average Assets and Return on Average Equity for the quarter ended March 31, 2026, were 1.29% and 13.06%, respectively.

According to Jason Rush, President and CEO, "We delivered strong earnings this quarter, driven by continued margin expansion. While overall growth was again tempered by elevated loan payoffs and paydowns, we maintained solid credit performance and believe our balance sheet is well-positioned. Our focus on operational efficiency and prudent risk management continues to yield results, positioning us well as we enter 2026 with positive momentum."

First Quarter Financial Highlights:

• Net interest margin, on a non-GAAP, fully tax equivalent ("FTE") basis, was 3.83% for the first quarter of 2026, reflecting increased loan yields and reduced funding costs.
• Strong loan production during the quarter, with $98.0 million in commercial loan originations and $16.0 million in residential mortgage originations.
• Provision expense was $0.9 million in the first quarter, as a result of continued economic and political uncertainty and increased off-balance sheet loan commitments, slightly offset by improved qualitative factors.
• Deposits increased by $15.5 million, inclusive of the repayment of a $25.0 million brokered certificate of deposit.
• Operating income, including net gains, increased slightly by $0.1 million when compared to the linked quarter.
• Operating expenses decreased by $1.2 million when compared to the linked quarter related to a $1.2 million, net of tax, write-down on an other real estate owned ("OREO") property in the fourth quarter 2025.
• A cash dividend of $0.26 per common share was declared in the first quarter.

Income Statement Overview

On a GAAP basis, net income for the first quarter of 2026 was $6.7 million.  This compares to $5.8 million in the first and fourth quarters of 2025. 

First Quarter 2026 Compared to First Quarter 2025

The $0.9 million increase in quarterly net income when compared to the first quarter of 2025 was primarily driven by a $2.1 million increase in net interest income, an increase of $0.4 million in non-interest income, inclusive of gains, partially offset by a $0.2 million increase in provision for credit losses as a result of increased off-balance sheet loan commitments, an increase in non-interest expense of $1.1 million, and an increase in income tax expense of $0.3 million.  Comparing the first quarter of 2026 to the same period of 2025, interest and fees on loans increased by $0.7 million resulting from new loans booked at higher rates late in 2025 and the repricing of adjustable-rate loans.  Interest expense decreased by $0.4 million when comparing year-over-year quarterly expense, resulting from the repayment of a $25.0 million brokered certificate of deposit in January 2026 and $65.0 million in Federal Home Loan Bank ("FHLB") borrowings in March 2026.  Other operating income increased by $0.4 million, driven by an increase in trust and brokerage income of $0.2 million resulting from increased production and a $0.2 million increase in bank owned life insurance ("BOLI") related to a one-time death benefit received in the first quarter of 2026.  Other operating expenses increased by $1.1 million driven by a $0.9 million increase in salaries and benefits as a result of filling open positions throughout 2025, normal merit increases in April 2025 and increased incentive payouts, partially offset by reduced life and health insurance expense due to reduced claims and an increase in the reduction of costs associated with loan originations related to increased loan production.  Professional services expenses increased by $0.1 million and data processing expenses increased by $0.2 million.  These increases were partially offset by reductions in other expenses such as miscellaneous loan fees and net periodic pension expenses.

First Quarter 2026 Compared to Fourth Quarter 2025

Compared to the linked quarter, net income increased by $0.9 million primarily due to reduced non-interest expenses, partially offset by a $0.2 million increase in provision expense.  Net interest income and non-interest income were stable when comparing the first quarter of 2026 to the fourth quarter of 2025.  Other operating expenses decreased by $1.2 million primarily driven by the $1.2 million, net of tax, write-down on an OREO property in the fourth quarter of 2025.  This decrease was partially offset by a $1.1  million increase in salaries and  benefit expenses driven by increased salaries of $0.2 million related to new hires in 2026, an increase of $0.4 million in incentive expense as a result of the reversal of incentives in the fourth quarter of 2025 related to slower loan growth than budgeted, an increase of $0.3 million as a result of maximum payouts in executive incentive plans, and an increase in taxes of $0.2 million associated with these increases.

Net Interest Income and Net Interest Margin

First Quarter 2026 Compared to First Quarter 2025

Net interest income, on a non-GAAP, FTE basis, increased by $2.1 million for the first quarter of 2026 when compared to the first quarter of 2025.  This increase was driven by an increase of $1.7 million in interest income.  Interest income on loans increased by $0.7 million due to the increase of 21 basis points in overall yield on the loan portfolio as new loans were booked at higher rates during 2025 as well as the upward repricing of adjustable-rate loans.  Investment income increased slightly by $0.1 million as management continues to reinvest cashflows back into the portfolio resulting in an increase in yield of 14 basis points. Interest income on federal funds sold increased by $0.8 million due to an increase of $87.2 million in average cash balances held at the Federal Reserve Bank as a result of strong deposit growth in 2025.  Interest expense, in the first quarter of 2026, decreased by $0.4 million when compared to the first quarter of 2025.  Interest on deposits remained stable despite a $95.9 million increase in average deposit balances, primarily in interest bearing demand and money market deposits. Long-term borrowing expense decreased by $0.3 million for the first quarter of 2026 when compared to the same period of 2025 due to the repayment of $65.0 million of FHLB advances at their maturity in March of 2026.

First Quarter 2026 Compared to Fourth Quarter 2025

Comparing the first quarter of 2026 to the fourth quarter of 2025, net interest income, on a non-GAAP, FTE basis, remained stable.  Interest income decreased by $0.4 million driven by a decrease in average loan balances of $26.4 million in the first quarter of 2026 as a result of elevated loan payoffs during the first quarter of 2026.  The decrease in interest income was partially offset by a decrease in interest expense of $0.5 million.  Interest on deposits decreased by $0.4 million, driven by a decline in rate paid of 13 basis points despite an increase in average deposit balances of $28.4 million.  Long-term borrowing expense decreased by $0.1 million due to the repayment of $65.0 million in March 2026.  Management's strategic focus on margin management during the first quarter of 2026 resulted in an 8 basis point increase in the net interest margin to 3.83% as compared to 3.75% for the fourth quarter of 2025.

Non-Interest Income

First Quarter 2026 Compared to First Quarter 2025

Other operating income increased by $0.4 million, driven by an increase in trust and brokerage income of $0.2 million, resulting from increased production as well as favorable increases in market values in assets under management, and a $0.2 million increase in BOLI related to a one-time death benefit received in the first quarter of 2026.

First Quarter 2026 Compared to Fourth Quarter 2025

On a linked quarter basis, other operating income, including net gains, increased slightly by $0.1 million.  Net gains increased by $0.2 million related to the loss on the sale of a branch office recognized in the fourth quarter of 2025.  BOLI income increased by $0.2 million attributable to the receipt of a one-time death benefit as discussed above.  These increases were partially offset by a decrease in debit card income of $0.2 million due to an annual incentive payment received in the fourth quarter of 2025. 

Non-Interest Expense

First Quarter 2026 Compared to First Quarter 2025

Other operating expenses increased by $1.1 million driven by a $0.9 million increase in salaries and benefits as a result of filling open positions throughout 2025, normal merit increases in April 2025 and increased incentive payouts, partially offset by reduced life and health insurance expense because of reduced claims and increased reductions in costs associated with loan originations.  Professional services expenses increased by $0.1 million and data processing expenses increased by $0.2 million.  These increases were partially offset by reductions in miscellaneous loan fees and net periodic pension expenses.

First Quarter 2026 Compared to Fourth Quarter 2025

Other operating expenses decreased by $1.2 million driven by the $1.2 million, net of tax, write-down on an OREO property and a $0.2 million, net of tax, contracted sale of a retail branch office in the fourth quarter of 2025. These decreases were partially offset  by a $1.1  million increase in salaries and  benefit expenses driven by increased salaries of $0.2 million related to new hires in 2026, an increase of $0.4 million in incentive expense related to the reversal of incentives in the fourth quarter of 2025 as a result of slower loan growth than budgeted,, an increase of $0.3 million related to maximum payouts on executive incentive plans, and an increase in payroll taxes of $0.2 million associated with the aforementioned salary increases.

The effective income tax rates, as a percentage of income, for the three-month periods ended March 31, 2026 and 2025 were both 24.6%. 

Balance Sheet Overview

Total assets at March 31, 2026 were $2.0 billion, representing a $48.4 million decrease since December 31, 2025.  During the first quarter of 2026, cash and interest-bearing deposits in other banks decreased by $41.8 million.  The investment portfolio increased by $3.2 million as cashflows of the bonds were reinvested in the first quarter of 2026 in an effort to gain yield before long-term rates decline. Gross loans increased slightly by $3.8 million.  While loan production was strong during the quarter, amortization and unusually high payoffs exceeded growth levels.  Pension assets decreased by $0.8 million due to decreased market values. 

Total liabilities at March 31, 2026 were $1.8 billion, representing a $50.1 million decrease since December 31, 2025.  Total deposits increased by $15.5 million when compared to December 31, 2025.  In January 2026, a $25.0 million brokered certificate of deposit with an interest rate of 4.23% matured and was repaid.  Savings and money market accounts increased by $44.4 million due primarily to the expansion of current and new relationships throughout the first three months of 2026.  Non-interest-bearing demand deposits decreased by $1.7 million and interest-bearing demand deposits decreased by $1.4 million due primarily to seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers.  Retail time deposits decreased by $0.8 million since December 31, 2025. 

Outstanding loans of $1.5 billion at March 31, 2026 reflected a $3.8 million increase since December 31, 2025.

Since December 31, 2025, commercial real estate loans increased by $38.7 million as a result of new customer relationships, acquisition and development loans increased by $7.5 million, commercial and industrial loans decreased by $30.8 million as a result of payoffs related to approximately $15.0 million due to competitive pricing, approximately $5.3 million related to sales of businesses, and approximately $8.0 million as a result of a refinance to another institution, residential mortgage loans decreased by $10.6 million as a result of normal amortization, and consumer loans decreased by $1.0 million.

New commercial loan production for the three months ended March 31, 2026 was approximately $98.0 million.  The pipeline of commercial loans as of March 31, 2026 was robust, and unfunded committed commercial construction loans totaled approximately $43.0 million.  Commercial amortization and payoffs were approximately $43.0 million through March 31, 2026, due primarily to pay-offs of short-term commercial loans as well as normal amortizations of the commercial loan portfolio.

New consumer mortgage loan production for the first quarter of 2026 was approximately $16.0 million, with most of this production comprised of in-house mortgages.  The pipeline of in-house, portfolio loans as of March 31, 2026 was $17.5 million.  Unfunded commitments related to residential construction loans totaled $14.4 million at March 31, 2026.  

Total deposits at March 31, 2026 increased by $15.5 million when compared to December 31, 2025.

In January 2026, a $25.0 million brokered certificate of deposit, with an interest rate of 4.23%, was repaid at its maturity.  Savings and money market accounts increased by $44.4 million due primarily to the expansion of current and new relationships throughout the first three months of 2026.  Non-interest-bearing demand deposits decreased by $1.7 million and interest-bearing demand deposits decreased by $1.4 million due primarily to seasonal fluctuations in municipal and commercial account balances and increased spending by businesses and consumers.  Retail time deposits decreased by $0.8 million since December 31, 2025. 

The book value of the Corporation's common stock was $31.84 per share at March 31, 2026 compared to $31.33 per share at December 31, 2025.  At March 31, 2026, there were 6,446,717 basic outstanding shares and 6,459,155 diluted outstanding shares of common stock.  The increase in the book value at March 31, 2026 was due to the undistributed net income of $5.0 million for the first quarter of 2026.

Asset Quality

The allowance for credit losses ("ACL") was $20.0 million at March 31, 2026 compared to $18.5 million recorded at March 31, 2025 and $19.5 million at December 31, 2025.  The provision for credit losses was $0.9 million for the quarter ended March 31, 2026 compared to $0.7 million for the quarter ended March 31, 2025 and the fourth quarter of 2025.  Asset quality remained strong during the first quarter of 2026.  Net charge-offs of $0.2 million were recorded for the quarter ended March 31, 2026 compared to net charge-offs of $0.4 million for the quarter ended March 31, 2025. The ratio of the ACL to loans outstanding was 1.31% at March 31, 2026 compared to 1.28% at December 31, 2025 and 1.25% at March 31, 2025. 

The ratio of net charge offs to average loans was 0.05% for the quarter ended March 31, 2026 and 0.10% for the quarter ended March 31, 2025.  The commercial and industrial portfolio had net charge offs of 0.11% and 0.50% for the quarters ended March 31, 2026 and 2025, respectively.  Net charge offs in consumer loans increased in the first quarter of 2026 when compared to the first quarter of 2025, from 0.65% to 1.23% .  The increase was primarily driven by an increase in charge-offs in unsecured consumer loans.  Details of the ratios, by loan type, are shown below.  Our special assets team continues to actively collect on charged-off loans, resulting in overall low net charge-off ratios.

Non-accrual loans totaled $4.7 million at March 31, 2026 compared to $4.2 million at December 31, 2025.  The increase in non-accrual balances at March 31, 2026 was related to one commercial loan moving to non-accrual status in the first quarter. 

Non-accrual loans that have been subject to partial charge-offs totaled $0.1 million at March 31, 2026 and $0.2 million at December 31, 2025.  There were no loans secured by 1-4 family residential real estate properties in the process of foreclosure at March 31, 2026.  Loans secured by 1-4 family residential real estate properties in the process of foreclosure totaled $0.5 million at December 31, 2025.  As a percentage of the loan portfolio, accruing loans past due 30 days or more increased slightly to 0.35% at March 31, 2026 compared to 0.32% at December 31, 2025 and 0.42% as of March 31, 2025. 

ABOUT FIRST UNITED CORPORATION

First United Corporation is a Maryland corporation chartered in 1985 and a financial holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended, that elected financial holding company status in 2021.  The Corporation's primary business is serving as the parent company of the Bank, First United Statutory Trust I ("Trust I") and First United Statutory Trust II ("Trust II" and together with Trust I, "the Trusts"), both Connecticut statutory business trusts.  The Trusts were formed for the purpose of selling trust preferred securities that qualified as Tier 1 capital.  The Bank has two consumer finance company subsidiaries- Oak First Loan Center, Inc., a West Virginia corporation, and OakFirst Loan Center, LLC, a Maryland limited liability company – and one subsidiary that it uses to hold real estate acquired through foreclosure or by deed in lieu of foreclosure – First OREO Trust, a Maryland statutory trust.  In addition, the Bank owns 99.9% of the limited partnership interests in Liberty Mews Limited Partnership, a Maryland limited partnership formed for the purpose of acquiring, developing and operating low-income housing units in Garrett County, Maryland, and a 99.9% non-voting membership interest in MCC FUBT Fund, LLC, an Ohio limited liability company formed for the purpose of acquiring, developing and operating low-income housing units in Allegany County, Maryland and Mineral County, West Virginia.   The Corporation's website is www.mybank.com 

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements do not represent historical facts, but are statements about management's beliefs, plans and objectives about the future, as well as its assumptions and judgments concerning such beliefs, plans and objectives.  These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions.  Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true.  The beliefs, plans and objectives on which forward-looking statements are based involve risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements.  For a discussion of these risks and uncertainties, see the section of the periodic reports that First United Corporation files with the Securities and Exchange Commission entitled "Risk Factors". In addition, investors should understand that the Corporation is required under generally accepted accounting principles to evaluate subsequent events through the filing of the consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 and the impact that any such events have on our critical accounting assumptions and estimates made as of March 31, 2026, which could require us to make adjustments to the amounts reflected in this press release.